One of the most popular methods of candle chart analysis is the usage of parallel channels. These channels help the trader earn good profits despite the condition of the market. Such channels can be found in the charts of any asset, may be in various shapes and sizes, and can be in any desired timeframe.
These parallel channels are divided into two types. They can be horizontal upward or horizontal downward, i.e., they will be formed as the trend ascends or descends. It is worth considering the size of the time range. On the weekly chart, the parallel channel will contain many 1H channels, which will descend or ascend. Accordingly, the channel on the hourly chart will consist of multiple 5M channels.
To carry out the parallel channel, you must find High and Low on the chart. Using these peaks, you can make the parallel channel. The price will move within this channel.
The strategy of using that trade parallel channels means that these parallel lines will act as the resistance and the support lines for the price.
During upward or downward trends, the price will move in the range. The possibility that the price will break the channel is minimal.
When the channel is defined, it is possible to wait until the price approaches one of the borders of the channel, and then itwill turn and move to the other edge of the channel.
During the upward trend, when the price approaches the lower boundary, the trend is expected to continue. Thus, we can assume that the price will turn from the lower boundary and rise again. Therefore,it makes sense to buy a CALL option.
During the downward trend, the price will come to the upper limit; thus, you can buy a PUT option to decrease asset value since prices are expected to fall.
It should be noted that when the trend is up, CALL options have a greater probability than PUT options to be profitable. Likewise, when the trend is downward, it will be safer to buy PUT.